What is EVA? What are the advantages and disadvantages of using EVA as a measure of company performance?
Case key points
COKE VERSUS PEPSI,
- Company Background: The Coca-Cola Company
- Company Background: PepsiCo, Inc.
Estimating Cost of Capital and EVA for Competitors
Case 5: “Coke vs Pepsi, ”
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Advance Assignment:
- What is EVA? What are the advantages and disadvantages of using EVA as a measure of company performance?
- Please examine the historical performances of Coca-Cola and PepsiCo in terms of EVA. What trends do you observe? What are the factors behind those trends? What do you think are the key drivers of EVA?
- What is the weighted-average cost of capital and why is it important to estimate it? Is the cost of capital something that managers set? Who sets it?
Solution:
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